Lombard Odier sees gold hitting record high

By Atul Prakash

LONDON (Reuters) - Gold has potential to set a record peak by December and the metal's average price is likely to be higher in 2010 than this year, as issues related to the credit crisis or inflation may resurface, a fund manager said.

Buying shares of precious metal companies, especially mid-cap gold miners, could yield attractive returns this year and next, said Aurele Storno, the manager of two funds at Switzerland-based Lombard Odier.

The LODH Invest -- World Gold Expertise fund and the LODH Multifonds -- Commodity fund manage a total of $270 million.

"We currently keep a defensive positioning in our commodity fund and wait for better entry points to profit from a potential new rebound over the coming six months," Storno told Reuters in an interview. "We also believe that the precious metals sector will do pretty well in the second half of the current year."

Storno said demand for gold has come back as people turn towards the precious metal to hedge against difficult economic conditions and the possible return of inflation.

"To us, it's a nice hedge in both the extreme scenarios. We are still living in a very volatile environment," he said.

But the gold price might not stay strong in the longer term and could fall significantly with an improvement in global economic conditions.

Spot gold surged to a record high above $1,030 an ounce in March 2008 and was quoted at around $928 on Wednesday.